Top Ten Tips Disclaimer
Part 516 of the wage and hour regulations (Title 29, Code of Federal Regulations) governs the recordkeeping obligations of employers under the FLSA. Employers should not regard the recordkeeping requirements as optional in any respect. Not only does the law require it, keeping accurate, reliable records regarding payroll matters is simply good strategy. The reason is simple: if an employee claims unpaid wages, especially unpaid overtime, and the employer is unable to counter the claim with any documentation, the "best evidence" rule used by the DOL will generally mean that the wage claimant will prevail on the question of hours worked, unless there is some independent reason to disbelieve the claimant. Following are the types of information for which employers must maintain records for possible inspection by DOL, as specified in 29 C.F.R. 516.2(a):
employee's full name - this is the same name as appears on Social Security records;
employee's home address - current address, including the employee's zip code;
employee's date of birth - this only applies if the employee is under 19 years of age. An alternative is to maintain an age certificate or other proof of the child's age - in Texas, such an age certificate is available from the Labor Law Department of the Texas Workforce Commission;
employee's gender and occupation - this is to allow verification of compliance with the Equal Pay Act provisions of the FLSA (see also 29 C.F.R. 1620.32);
workweek applicable to the employee;
employee's regular rate of pay - this applies to workweeks in which overtime is worked. In addition, the records must also reflect any payments to the employee that are not included in the regular rate;
wage payment basis - this is the basic pay rate applied to the employee's straight-time earnings;
hours worked by the employee - the records of hours worked should show hours worked each day and total hours for each workweek;
employee's straight-time earnings - total earnings on a straight-time basis, excluding overtime pay;
overtime pay on a workweek basis - this shows total overtime compensation for each workweek in which overtime is worked;
deductions from and additions to each employee's pay - these records must be maintained individually for each employee and must reflect the types of deductions or additions, the amounts deducted or added, and the dates of deductions or additions;
total wages paid - this is the total compensation paid to each employee for each pay period, broken down by straight-time earnings, total weekly overtime pay, and deductions or additions to pay;
pay periods - the records must show the dates on which each employee is paid, as well as the pay period applying to each employee's wage or salary payment; and
back pay - this relates to any government-supervised back or retroactive pay to employees that is given as a result of employment claims or lawsuits. Such records must reflect the employees receiving the back pay, the amount of the payment, the period covered by the payment, the date such payment is made, and date of receipt of the payment by the employee.
While some wage and hour records must be kept only two years, others require retention for three years under the federal law, and since the Texas unemployment tax rules require a four-year retention period for payroll records, it is a good idea to keep all wage and hour records for at least four years.
The recordkeeping requirements may be changing in the very near future. In 2010, DOL issued a notice of proposed rulemaking indicating that it will begin requiring employers to conduct an analysis of any position for which the worker is not counted as an employee, showing that under the economic reality test, the worker is not in the company's employment. In addition, the company will have to show that it informed each such worker of its analysis and of the worker's rights under the FLSA. Employers should visit www.dol.gov/whd/ often to stay up with developments in this area of the law.
Return to Businesses & Employers
Return to TWC Home